Economy

Although the past decade has been a rough ride for Costa Rica, its
economy has, in many ways, been a model for developing nations. Highly
efficient coffee and bananas industries, aided by high and stable world prices,
have drawn in vast export earnings. Manufacturing has grown rapidly under the
protection of external tariffs and the expanding purchasing power of the
domestic market (per-capita income doubled between 1960 and 1979). And the
nation for long avoided amassing a crippling foreign debt.

Overnight, Costa Rica's economy took a serious fall, however, in
1978. World coffee prices plummeted, slashing the country's income. The
following year, oil prices rose sharply (Costa Rica spends the equivalent of
its total coffee income for foreign oil every year) while foreign
capital took to its heels with the outbreak of the Nicaraguan Revolution, which
slowed commerce throughout the isthmus. Costa Rica is dependent on foreign
investment. The welfare state established in the 1960s and 1970s was financed
largely through foreign loans, and the industrialization policies of the 1970s
based on import substitution were largely funded by foreign sources of
investment capital.

In 1980, a large part of the foreign loans came due. Starved for
money, the government of President Rodrigo Carazo (1978-82) began to soak up
domestic bank credit, devalued the colón, and printed more money
to meet its debts. Carazo's government was overwhelmed by the resulting crisis.
Inflation soared to 100% by 1982. Industrial production went into decline.
Official unemployment rose to 8.2%, with an additional 22.6% officially
"underemployed" (unofficial figures were certainly higher). Real wages fell to
pre-1970 levels, bringing impoverishment to much of the nation (35% of the
nation's families were officially below the poverty line in 1991). By August
1981, when the nation's foreign debt reached US$4 billion, Costa Rica was
forced to cease payment on its international loans.

The U.S. and International Monetary Fund (IMF) stepped in with a
massive aid program which injected $3 billion into the economy between 1981 and
1984, equivalent to more than one-third of the Costa Rican government's budget
and 10% of the nation's GNP for the period (Costa Rica was second only to
Israel as the highest per-capita recipient of U.S. aid). Much of the U.S.
government aid was tied to Costa Rica's support for the contra cause (see
"Costa Rica and the Nicaraguan Revolution," pp. 66-67); IMF and World Bank
assistance was tied to austerity measures designed to slash government
spending, stimulate economic diversification, and sponsor competitive export
industries.

Costa Rica must diversify to recharge an economy reeling
under the impact of plummeting earnings from coffee--in 1991 coffee earnings
plummeted to $180 million, down from $300 million the year before--and a
debilitating international debt which today, at US$3.5 billion or $1200 for
each of its three million citizens, is one of the world's highest per capita.

In spite of a steady growth in GNP during the past decade, real
wages remain basically stagnant (inflation reached 27% in 1992), a growing
proportion of resources goes to service the national debt, and the government
has found it impossible to meet any of the IMF goals.

The current government of Rafael Calderón, under strong
pressure from the IMF and World Bank, has pledged to balance the budget and
rectify Costa Rica's structural weaknesses. Albeit halfheartedly, state-owned
enterprises are being sold off, elements of the social welfare institutions are
being dismantled, subsidies and tax exemptions--such as those for
pensionados (foreign residents)--are being rescinded, and new taxes are
being levied on income and savings. In the short run the social costs will be
high. On the bright side: the current blossoming in tourism and nontraditional
export items is pulling in hundreds of millions of dollars and will
increasingly help alleviate the current crisis.

MANUFACTURING

Manufacturing still plays a relatively small part in the Costa Rican
economy (in 1990 earnings from industrial manufacturing were US$398
million--21.6% of GNP), and there is little to suggest that industrialization
is going to transform the essentially agricultural economy in the near future.
The market for manufactured goods is largely restricted to a small population
with a relatively low purchasing power. Hydroelectricity, though well
developed, is the only domestic source of power. Local industrial raw materials
are restricted to agricultural products, wood, and a small output of mineral
ores. Manufacturing is still largely concerned with food processing, although
pharmaceutical and textile exports have risen dramatically in recent years.
Major industrial projects also include aluminum processing, a petrochemical
plant at Moín, a tuna-processing plant at Golfito, and an oil refinery
at Puerto Limón.

AGRICULTURE

Agriculture dominates the Costa Rican economy. The fact is obvious
everywhere you go, particularly in the Central Highlands, where a remarkable
feature of the land is the almost complete cultivation, no matter how steep the
slope. Nationwide, some 12% of the land area is planted in crops, 45% is given
to pasture, and only 27% is forested. Despite the ubiquitousness of small
family farms, large-scale commercial agriculture is more important in terms of
dollar value, even in coffee, where a relatively small number of large farms
associated with the coffee beneficios (processing plants) have
established their dominance.

Coffee--grano d'oro (golden bean)--is the most
important crop in terms of area and export earnings (bananas, however, zipped
into the lead as the biggest income earner in 1991, following the collapse of
world coffee prices). The mist-shrouded slopes of the Meseta Central and
southern highlands are adorned with green undulating carpets of coffee. The
large hacienda is foreign to the traditions of the Meseta Central and the
fabric of the rural landscape, with its thousands of small-sized farmsteads, is
reminiscent of certain parts of peasant Europe.

Red-tiled and corrugated-roofed houses straggle along the web of
farm roads and, by their pattern and numbers, indicate that pressure on the
land has mounted. Some relief has been found by intensifying cultivation of
coffee and, west of Alajuela and at lower levels, sugarcane; elsewhere in the
higher, more temperate areas, carnations, chrysanthemums, and other flowers
grow under acres of plastic sheeting, and dairying is becoming more important
in a mixed-farming economy that has been a feature of the Meseta since the end
of the 19th century. The situation is a far cry from the very limited economy
of the Altiplano at similar elevations in Guatemala.

The vast banana plantations which swathe the Caribbean
plains produce some 50 million boxes of bananas per year, accounting for 30% of
the nation's export earnings in 1992 and making Costa Rica the second-biggest
exporter of bananas in the world, behind Ecuador. Sugarcane is grown by
small farmers all over the country but becomes a major crop on plantations as
you drop into the lowlands (particularly rapid growth in sugar production
occurred in the 1960s after the U.S. reassigned Cuba's sugar import quota;
production has since gone into decline--in 1981 Costa Rica had to import sugar
to meet domestic demand). And cacao, once vital to the 18th-century
economy, is on the rise again as a major export crop; the trees, fruit hanging
pendulously from their trunks, are everywhere, especially in large plantations
around Limón and Upala and to a much lesser degree around Alajuela and
increasingly around Golfito and the llanuras.

By far the largest portion of agricultural land (70%) is given to cattle
pasture. Despite its evolving complexion, Guanacaste remains essentially what
it has been since midcolonial times--cattle country--and three-quarters of
Costa Rica's 2.2 million head of cattle are found here. They are mostly
humpbacked zebu, originally from India and now adapted over several
generations; there are also herds of Charolais and Hereford. Low-interest loans
in the 1960s and 1970s encouraged a rush into cattle farming for the export
market, prompting rapid expansion into new areas such as the Valle de El
General and more recently the Atlantic lowlands.

Although Costa Rica is today Latin America's leading beef exporter
(it accounts for some five percent of U.S. meat imports), beef has never
provided more than nine percent of Costa Rica's export earnings. Sadly, much of
the land placed under cattle in recent decades has been on steep hill slopes
that have been stripped bare of timber. The scoured slopes bear mute testimony
to the greed and folly of man. Destructive floods now common in the terra
caliente of the Pacific lowlands can be traced to "cattle mania." And the
loss of the ready smile of the small farmers who have been driven from their
land--cattle ranches need little labor--is a poignant reminder of a cancer that
has slowly but inevitably eaten away at the land. All this so that North
Americans can enjoy their hamburgers and TV dinners.

Bananas

Costa Rica's banana industry, currently the country's number one earner of
foreign currency, continues to expand to meet the demand of a growing
international market. Some 32,000 hectares are currently planted, a 50%
increase since 1985. At current rates of expansion, bananas will cover 45,000
hectares by 1995. Most growth is concentrated in the north Atlantic lowlands.

Bananas have been a part of the Caribbean landscape since 1870,
when American entrepreneur Minor Keith shipped his first fruit stems--360
bunches--to New Orleans (see pp. 63-64). In 1899, his Tropical Trading &
Transport Co. merged with the Boston Fruit Co. to form the United Fruit Co.,
which soon became the overlord of the political economies of the "banana
republics." By the 1920s, much of the chaotic jungle south of Puerto
Limón had been transformed into a vast sea of bananas.

Then, as now in some areas, working conditions were appalling, and
strikes were so frequent that when Panama disease and then sigatoka
(leaf-spot) disease swept the region in the 1930s and 1940s, United Fruit took
the opportunity to abandon its Atlantic holdings and move to the Pacific coast,
where it planted around Golfito, Coto Colorado, and Palmar (operated by United
Fruit's subsidiary Compañia Bananera). Violent clashes with the banana
workers' unions continued to be the company's nemesis. In 1985, after a 72-day
strike, United Fruit closed its operations in southwestern Costa Rica. Many of
the plantations have been replaced by stands of African palms (used in cooking
oil, margarine, and soap); others are leased to independent growers and
farmers' cooperatives who sell to United Fruit.

The Standard Fruit Co. began production in the Atlantic lowlands in
1956. Alongside ASBANA (the Asociación de Banañeros), a
government-sponsored private association, Standard Fruit helped revive the
Atlantic coast banana industry. Much of the new acreage, however, has come at
the expense of thousands of acres of virgin jungle. (See "Bananas: Friend or
Foe?," p. 350.)

Coffee

Costa Rica's Meseta Central possesses ideal conditions for coffee production,
and beans grown here are ranked among the best in the world. The coffee plant
loves a seasonal, almost monsoonal climate with a distinct dry season; it grows
best, too, in well-drained, fertile soils at elevations between 800 and 1,500
meters with a narrow annual temperature range--natural conditions provided by
the Meseta Central. The best coffee--mild coffee commanding the highest
prices--is grown near the plant's uppermost altitudinal limits, where the bean
takes longer to mature.

The first coffee beans were brought from Jamaica in 1779. Within 50
years coffee had become firmly established; by the 1830s it was the country's
prime export earner, a position it occupied until 1991, when coffee plunged
overnight to third place in the wake of a precipitous 50% fall in world coffee
prices after Brazil scuttled the International Coffee Agreement quota system in
1989. (Ticos can find satisfaction in the fact that their coffee has an
unusually high "liqueur," or coffee essence, content of 86%; Brazilian coffee
has a meager 29% content.)

Coffee exports earned $250 million in 1991, representing only 15%
of the nation's commercial exports of $1.6 billion, and a loss of $100 million
over 1990. This despite the fact that Costa Rica today has the greatest coffee
productivity per acre in the world. In May 1992, Costa Rican coffee growers
rioted in towns throughout the highlands; they even briefly suspended exports
to protest the low prices. The decline has caused widespread distress for small
farmers and the 45,000 poorly paid laborers who rely on work in the harvest
season.

Population pressure on the land has induced the adoption of the
most modern and intensive methods of cultivation, including high-yielding
plants. The plants are grown in nurseries for their first year before being
planted in long rows which ramble invitingly down the steep hillsides, their
paths coiling and uncoiling like garden snakes. After four years they fruit. In
April, with the first rains, the small white blossoms burst forth and the air
is laced with perfume not unlike jasmine. By November, the glossy green bushes
are plump with shiny red berries--the coffee beans--and the seasonal labor is
called into action.

The hand-picked berries are trucked to beneficios
(processing plants), where they are machine-scrubbed and washed to remove the
fruity outer layer and dissolve the gummy substance surrounding the bean (the
pulp is returned to the slopes as fertilizer). The moist beans are then
blow-dried or laid out to dry in the sun in the traditional manner. The leather
skin of the bean is then removed by machine, and the beans sorted according to
size and shape before being vacuum-sealed to retain the fragrance and slight
touch of acidity characteristic of the great vintages of Costa Rica.

A visit to a coffee finca (farm) is an interesting day-trip
from San José. Cafe Britt (tel. 237-5044 or 238-4240, fax
238-1848) offers an hourlong "Coffeetour" of its finca and beneficio,
including an English-language multimedia presentation on the "Story of
Coffee." At San Pedro de Barva, 10 km north of Heredia, is a coffee research
station and the Museo de Cafe (tel. 237-1975; hours Mon.-Fri. 7 a.m. to
3 p.m.). Aventuras Turísticas de Orosí (tel. 533-3030, fax
533-3212) offers an "Orosí Coffee Adventure" featuring a tour of a
coffee farm and beneficio (three hours; $20).

TOURISM

Costa Rica is the world's fastest-growing destination for adventure and
nature travel, and travelers of every other persuasion are pouring in, too. The
resort industry is beginning to stir as the seductive potentials of Costa Rica
are realized. Even the cruise lines are taking notice. And the country has
recently been adopted as the darling of the ecotourist: the just reward for two
decades of foresight and diligence in preserving its natural heritage in
national parks and wildlife reserves.

Costa Rica gains more and more fans every year. Official statistics
claim that in 1992, 610,093 tourists visited Costa Rica: an increase of 28%
over the previous year. Tourism even scored a 16% increase in 1991, a
remarkable figure for the year of the Gulf War, which devastated the travel
industry throughout the rest of the world. Costa Rica expects one million
visitors in 1995.

The nation's status as a "destination of the '90s" is a boon to the
struggling economy. In fact, the government is relying on tourism dollars to
help pull the country out of debt. In 1993, tourism will generate an estimated
$500 million, boosting it past the banana industry to become the nation's prime
income earner.

Costa Rica has tried to prepare for the growing flood in eager
anticipation of the welcome injection of dollars. In May 1990, the country
installed its first tourism minister, Luis Manuel Chacón, on the
president's cabinet. To accommodate the growing number of visitors, he has made
expansion of hotel rooms a priority: his goal is to increase by 50% the
country's 12,000 rooms (1992) by the end of his tenure in 1994. At current
rates of tourism expansion, the country needs to open 500 new rooms each month.
While many a hotel corridor echoes in the rainy-season months, it is currently
difficult to get beds Nov.-April, when a severe case of room shortage afflicts
many of the more popular spots.

The Beach Resort Boom

In its haste to boost the influx of tourist dollars, the government of Rafael
Calderón is promoting large-scale resort development. Over 50% of
visitors in 1991 mentioned that they were visiting Costa Rica to pursue some
interest in nature. Now, the government is trying to position Costa Rica as a
comprehensive destination for the whole family, and particularly as a beach
resort contender to Mexico and the Caribbean.

Sprawling resort complexes are beginning to sprout from the jungled
shoreline. Chief among these is the Gulf of Papagayo project encompassing
several beaches. The megaresort, being constructed by a host of European
developers spearheaded by the Spanish developers Sol Melia, will be the largest
"leisure city" in Central America, with rooms for 6,000 tourists in 2,000
rooms, 50 luxury villas, 400 family villas, and 700 apartments, replete with
shopping center, golf course, and other supporting amenities. The first stage
was completed in 1993.

Savvy tourism experts speak disparagingly of the so-called Cancun
model because it encourages precisely the low-budget mass tourism that Costa
Rica has long professed wanting to avoid.

The Down Side

There has been much debate about how to regulate the impact of tourism on Costa
Rica. Concern about whether Costa Rica is growing too fast and shifting from
its eco-tourism focus toward mass-market tourism led, in 1993, to a threatened
boycott of the country's annual travel trade show, Expotur, by environmentally
responsible tour operators and threatens to be a contentious issue for years to
come. But everyone agrees on one point: the nation lacks any sort of coherent
tourism development plan to control growth. Consequently, developers large and
small are pushing up hotels along Costa Rica's 767 miles of coastline in total
disregard of environmental laws.

In 1977, the country adopted the Maritime Terrestrial Zone Law,
which declares the country's entire coastline to be public property, prohibits
construction within 50 meters of the point halfway between high and low tides,
and restricts construction within 200 meters of the same spot. It happens
anyway without punishment. The sheer volume of violations, said a report in the
Tico Times (29 May 1992), "bespeaks a massive lack of political will . .
. Violations of the coastal law--most noticeably building within the
`inviolable' 50-meter tide line--are out of control." Concerned
environmentalists are calling for a prosecutor's office exclusively to enforce
the Maritime Terrestrial Zone Law.

How bad is it? Consider this. Maurice Strong, the organizer
of the Earth Summit held in Rio de Janeiro in June 1992, is among the accused.
In June 1992, Costa Rica's Ministry of Natural Resources filed charges against
Strong and Julio Garcia, his partner in Desarollos Ecologicos S.A., for
building their 12-unit Villas del Caribe on land located in the KekoLdi Indian
Reserve and Gandoca-Manzanillo Wildlife Refuge without official permits. And
the Spanish developer Barceló was hauled into court and stoked the ire
of environmentalists for flagrant and consistent breaches of environmental
codes during construction of a 400-room resort at Playa Tambor, opened in 1992.
The government seemed willing to close a blind eye (when Tourism Minister
Manuel Chacón visited Berlin in March 1993, a German environmental group
gave him the "Environmental Devil" award for the Costa Rican government's
support of the Tambor project).

Unless a conscientious development plan is formulated soon,
eco-tour operators warn that the government may kill the goose that lays the
golden egg.

The Up Side

Costa Rica stands to gain much more than cash from the current boom. Firstly,
optimists suggest that the profit potential of tourism encourages private
landowners to regard natural areas as long-term assets rather than a source of
quick cash, and that resort developers realize that the added expense of
building around rather than through a forest pays ample dividends in the
end. And the employment opportunities are huge. Tourism Minister Chacón
has gained ground in training a broader segment of the Costa Rican population
to work in tourism: his five-year goal is to train an additional 15,000 Costa
Ricans for the tourism industry (27,600 were so employed in 1991).

The government is also pouring money into improving road access to
popular destinations like Cahuita, Flamingo, Monteverde, Quepos, Sámara,
Tamarindo, and Tambor--which are all sometimes difficult to reach in wet
season. Unfortunately, where roads come so do the loggers. And local residents
fear that if the roads that lead to more remote natural shrines are paved, more
and more tourists will flock, thereby quickening the possible destruction of
the very thing they come to worship.

Eco-tourism

Travel, like fashion, follows trends. In the 1990s the ecological movement has
become something of a solar-powered steamroller, changing the way we travel. A
1986 study by the Costa Rican Tourism Institute found that 87% of tourists
surveyed cited natural beauty as one of their main motivations for visiting
Costa Rica, and 36% specifically cited eco-tourism.

More recently, eco-tourism--defined as responsible travel that
contributes to conservation of natural environments and sustains the well-being
of local people by promoting rural economic development--has become to the
1990s what the European Grand Tour was to the 1930s and adventure travel was to
the 1980s. Many adventure enthusiasts of the last decade have discarded their
wetsuits, mountain boots, and whitewater rafts; they still want to explore
exotic regions, to peer beneath the veneer of the normal mass tourist
experience, but in a more relaxed and socially acceptable manner. Bringing only
their curiosity, the new wave of eco-tourists are leaving their footprints--and
their cash.

Costa Rica practically invented the term. In October 1991 the
country was chosen as one of three winners of the first environmental award
presented by the American Society of Travel Agents (ASTA) and
Smithsonian magazine. The award was designed to recognize a "company,
individual or country for achievements in conservation and environmentalism."
Costa Rica shared the prize along with the late Brazilian activist "Chico"
Mendez and the country of Rwanda. In 1992 Costa Rica won the Golden Compass
Award for its exemplary support of eco-tourism. "Since 1979, the country has
been defining what conservation in Latin America is and should be," says Steve
Cornelius, the Central American program officer for the World Wildlife Fund.

Just because a tour is labeled "eco-tour" doesn't mean that it is.
The term has become catchy. "Everybody talks about eco-tourism to the point
where the word is being prostituted," says Sergio Volio, a former Costa Rican
national park ranger and now owner of the eco-tourism company Geotur. The term
can have little meaning if a tour provider doesn't adhere to sound
environmental principles.

Fortunately, many tour operators in this fledgling but
fast-developing industry are honorable role models. One company has helped
build trails that minimize erosion of fragile watersheds. Another makes tour
members sign a contract that states they won't touch anything, not even a rock.
Other companies hire local guides exclusively. And a key aspect of
Seattle-based Wildland Adventures' program to the Caribbean coast is a stay at
the Chimuri Lodge, near Puerto Viejo; the lodge is owned and operated by a
Bribrí Indian, Mauricio Salazar, who leads groups on rainforest walks.

Filtering tourist dollars into the hands of locals is another
problem. In January 1990, the World Wildlife Fund released a two-volume report
which found that people interested in nature travel and in visiting fragile
environments generally spend more money than other kinds of tourists. Yet
Guillermo Canessa, a veteran conservationist and nature guide, found that less
than three percent of the profits earned by the tour companies and hotels in
Tortuguero actually benefit people of the local community. And conservationists
claim that neither the foreigners who are flocking to the nation's protected
areas nor the tour companies that bring them there are contributing their share
to maintaining the parks. The entrance fee is currently $1.50; at press time,
the National Assembly was studying a proposal to charge tour companies US$10
for every tourist they bring to each park.

In support of regulated eco-tourism and the Code of Environmental
Ethics for Nature Travel established by Tsuli/Tsuli (the Costa Rican chapter of
the National Audubon Society), the Institute for Central American Studies has
formed a Department of Responsible Tourism. The DRT monitors the compliance of
tour operators according to the code of ethics, as well as the impact that
tourism has on local communities and development in Costa Rica. Based on these
investigations, Tsuli/Tsuli and the DRT can recommend "responsible" tour
operators and can research complaints about those who are not complying.